Business, Legal, and Rare Products or Opportunities

In 2018 Madagascar’s economy was in one of the worst nadirs of its history. With low purchasing power domestically and insecurity in the capital and decreased quality of living overall driving many people out of commerce or country, a resultant opportunity is that many businesses, commodities, and property in general was much cheaper and miserable business-owners were rushed to sell it. Commodities in Madagascar are not the cheapest in any class or category compared to market leading production countries, though some foodstuffs are of markedly high quality, such as vanilla and cacao.

Gems trade is relatively popular with foreigners in Madagascar, and foremost among these isle riches is the blue colored variety. Madagascar is the world’s largest exporter of sapphires, from the south in Ilakaka near Isalo’s range, and a few well-organized multinational companies have built mines (such as the well-known Canadian Illuminite mine in Fort Dauphin.) Tourism is suffering from undersupply in accommodation and no world-class brand name hotels exist, however tourists to Madagascar also pay relatively little compared to most Indian Ocean and African nations nearby. Mauritius for example still drives in about 5 times as many tourists as Madagascar.

Registering a business in Madagascar can take about a month and a few hundred dollars of total capital if you do it all on your own and spend your daily time and focus there to see it through, but is enormously laborious and tax authorities are intractable and arcane as can be licensing regimes. Though 20-30% is technically the corporate tax rate depending on income of a business, in reality the tax authorities simply negotiate and jostle for revenues regardless of receipts and accounting books. Banks are slogged and monitored and all money transfers transit for days or even weeks in the capital before they reach their respective branch banks (BOA, BNI, BMOI, SG, etc), with many revenues monitored and logged to the government for taxation. Generally as a rule of thumb about 80% of taxes run correctly in line with receipts and revenues monitored or reported through banking, while 20% are malleable and negotiated, arbitrarily, randomly, and sometimes bizarrely or unfairly.

Customs duties peg to invoices and valuations in Madagascar and so the duty rate is set to the bank transfer and invoice on outgoing goods, while additional stamps and paperwork for export are totally at random whim and often tools for extracting other nominal, official, or unofficial fees. There is a lot of invoice fraud as a result whereas a percent of the actual purchase of goods can be paid in a second externally located bank so that invoices can be devalued. There are endless ways in which government can enact extractive measures quite at random on businesses, with little rhyme or reason, and the tax officials that appear almost never come with the same team, to maximum revenue intake and prevent colluding and coziness between business and tax officers. If your business comes to accord with tax authorities one year, the Tana government may send somebody different the following year. From their perspective, receipts and cash payments are rarely if ever accurately reported as well, and much of the even formal economy or run partially informally, or paid in that way.

Land can be fully owned by Malagasy citizens, though “leased” for 99 years by resident foreigners or businesses in Madagascar. You cannot freehold and 100% own land as a foreigner forever. Only for 99 years. Putting the name and title of land under a Malagasy business partner, partner or spouse, or friendly national is highly ill-advised and such arrangements in more than 85% of circumstances statistically have ended in miscarriage of agreement and the foreign financier or foreign party being marginalized and the land or assets tagged to them or their building being appropriated and taken.

In matters of civil and criminal law there are many good lawyers in Madagascar who are out to do the right thing for their clients and the public good. However in the contract law and business and corporate and tax law sector and core competencies, lawyers often work as double agents for each side of a plaintiff and defendant equation, and extract informal concessions from one for encouraging action from their own paying clients. Lawyers who are totally clean rarely if even achieve their clients’ aims let alone fairness and justice in this realm, and unfortunately judges and tribunals are especially prone to Malagasy interests in Antananarivo, and seldom if ever rule on the side of a foreigner.

Antananarivo’s central government also appoints deputies and heads of police and military in pertinent bodies to the offices of power in the provinces too, in order to retain control and revenues from the countryside which generates many riches of the nation in an economy lacking value-added or tech and service sectors. A lot of rural and provincial middle and upper class in Madagascar are becoming hostile to the central government and the extractive satellite kingdom they often represent. Sometimes, the climate of business in the coast can be much easier than in the capital, and safer for foreigners to invest.

Getting residence in Madagascar is relatively easy if you have a project and intent, and requires a notarized work contract from a Madagascar entity, a business registered, or a marriage, and eventually the application for said permit at an exterior embassy of Madagascar outside the nation. Please visit our page dedicated to this for more information.

The currency in Madagascar, the ariary, is vaguely but not officially pegged to the dollar-euro money market index in multiples and tracks it, weakening over time and making the country very cheap for dollar-carrying visitors.

Madagascar business is better conducted with boots on the ground often or always, and keeping vigilance on staff is important as well as associates and vendors. Kind persistence and measured gestures of trust, capping risk and the downside, can get you far. Excellent labor exists for great prices and healthcare is very cheap to provide, with an excellent salary in Madagascar terms being around $200 a month. Firing is harder, as the law is for 3 months severance pay, and deadbeat employees and even thieves can cause all worlds of headaches if you terminate their job. Contractors with win-win incentives can work much better.

Do not expect professional email dialogue or even tech and basic computer tools proficiency, expect to search and hire carefully, and expect a high level of requisite supervision and team management. Women are usually much more responsible as employees statistically in Madagascar, and have higher retention, loyalty, and stability rates and levels of honesty with accounting. It is not uncommon to see many young and old men sitting around outside listlessly, especially in the capital, and unpaid female labor is all-too-common as this segment of the workforce is undervalued and utilized. Hire very carefully if at all.

For almost all foreigners, even expatriates, the wages in Madagascar are extremely low and not attractive to foreigners. Volunteers and teachers do exist of course, however employees are few and far between and lucrative employment opportunities for Malagasy companies are scarce.